Stocks closed out the final trading session of the quarter with modest losses, but all three major averages posted robust gains for the month and the third quarter, boosted by a flood of central bank actions.
The Dow Jones Industrial Average slipped 48.84 points, or 0.36 percent, to close at 13,437.13. Cisco led the blue-chip gainers, while Intel lagged. The blue-chip index was down nearly 120 points at session lows.
The S&P 500 fell 6.48 points, or 0.45 percent, to finish at 1,440.67. The Nasdaq slumped 20.37 points, or 0.65 percent, to end at 3,116.23.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, closed above 15.
While September is historically the worst performing month for stocks, the Dow rallied 2.7 percent this month, logging the third largest gain in 2012. (Read More: What Happened to the ‘Worst Month of the Year?’)
And for the quarter, the Dow jumped 4.32 percent, the S&P 500 rallied 5.76 percent, and the Nasdaq soared 6.17 percent. Home Depot was the biggest gainer on the blue-chip index for the quarter, while H-P was the worst performer. Most key S&P sectors posted gains for the quarter, led by energy, while utilities sagged.
“We’re cautious about the next couple of months with the elections and the fiscal cliff coming up so now is a good time to take profits for the year,” said Savita Subramanian, U.S. equities and quantitative strategist at Bank of America Merrill Lynch. “[But] 1,600 is our price target for the year-end of next year…Wall Street sentiment is at the lowest level since 1985, a lot of negative news has been priced into the equity market at this point.”
Stocks pared their losses after results of the Span's bank stress testsshowed that the financial system's capital shortfall is around 60 billion euros in a stressed scenario, while capital shortfall for all nationalized banks is 49 billion euros.
Earlier, yield on Spain's 10-year government bonds rose over the six percent mark, sending European shares lower. On Wednesday, Spain announced the budget for 2013 would focus on cutting spending rather than raising taxes, and the government would pass laws to reform the economy over the next six months.
Stocks opened sharply lower after the Institute for Supply Management-Chicago said its index of Midwest business activity fell below 50 for the first time since September 2009.
Meanwhile, consumer sentiment dippedfrom its preliminary September report, according to the Thomson Reuters/University of Michigan Survey, but still hit the highest level in four months.
“Now that we have QE3 out of the way, the focus is going to be on the economic data,” said Joe Bell, senior equities analyst with Schaeffer’s Investment Research. “And with third-quarter earnings right around the corner, we may see some preannouncements in the weeks ahead as well.”
Bell expects to see the S&P 500 pull back near 1,420 before jumping higher by year-end on the heels of increasing investor pessimism.
Facebook was sharply higher after the social-networking giant unveiled a new feature that would allow users to send "gifts" to their Facebook friends, sending shares up sharply. Meanwhile, Amazon.com announced it is planning an online marketplace for wine sales.
McDonald's declined after the fast-food chain was downgraded to "neutral" from "buy" at Janney Capital. Rival Yum Brands also traded lower.
Bank of America
Research In Motion jumped after the BlackBerry maker reported a smaller quarterly loss than expected on higher revenue. At least three brokerages raised their price targets on the firm, while NBF boosted its rating on the company to "outperform" from "sector perform." (Read More: New BlackBerry 10 Is 'Mind Changing'—CEO)
Meanwhile, Apple’s iPhone 5 rolls out to another 22 countries. Separately, CEO Tim Cook apologizedfor the frustration that its maps application has caused since the company updated its operating system that replaced Google Maps with Apple's own application.
Nike topped earnings expectations, but shares declined as the sports-apparel company warned of slowing orders in China. Canaccord Genuity raised its price target on the firm to $94 from $92.
Also on the economic front, consumer spending rose in August by the most in six months, according to the Commerce Department.
—By CNBC’s JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)
On Tap Next Week:
MONDAY: PMI Mfg Index, ISM Mfg, construction spending, Bernanke speaks, Kraft spinoff
TUESDAY: Monthly auto sales
WEDNESDAY: Weekly mortgage apps, ADP employment report, ISM non-mfg index, oil inventories, H-P analysts mtg; Earnings from Family Dollar, Monsanto, Marriott
THURSDAY: Chain-store sales, Challenger job-cut report, jobless claims, factory orders, FOMC minutes
FRIDAY: Non-farm payrolls, consumer credit
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